U.S.-based fashion label Michael Kors confirmed rumors this morning (July 25, 2017) when it announced plans to purchase London-based luxury accessory brand Jimmy Choo. Kors paid $1.2 billion for Jimmy Choo, a luxury brand that has 150 stores globally and also sells to high-end department stores.
Jimmy Choo was founded in 1996 by Tamara Mellon and Malaysian shoe designer Jimmy Choo Yeang Kea, who sold his share in the company in 2001. Mellon sold her stake 10 years later after a contentious battle over how the company was being managed. The company listed (CHOO) on the London stock market in 2014, the first luxury shoe brand to ever go public.
The stock has performed well and in March, CHOO announced record annual revenue and profits in March, helped by strong sales in Asia. Conversely, Kors stock has struggled, hurt by loss of brand luster, a problem that grew out of over distribution of the bag leading to increased promotions.
On social media, fans of Jimmy Choo have reacted with disappointment to the news, expressing fear that Kors will mismanage the brand and cause it to lose its luxury appeal.
It’s possible of course that Kors will screw up Jimmy Choo the same way it did its own brand, though it probably purchased the brand specifically because it’s a luxury label, a pricing category that’s very difficult to enter and at the same time more immune to online competition.
Once the splashy announcement fades, Kors will probably keep Jimmy Choo’s business very separate. Already, Kors has said it plans to grow the brand by opening more doors, increasing its online presence and expanding style offerings. As such, not a whole lot on the surface is likely to change.
One place to keep an eye on is manufacturing. Currently Jimmy Choo’s shoes and bags are made in Italy and Spain. If Michael Kors is serious about keeping its new acquisition a luxury brand, it will stick with its current factories. However, if it tries to save money by making Jimmy Choo in China, all bets are off on its fate.
